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In the past 10 years, Nasdaq Composite It produced very good results for investors. The tech-heavy benchmark returned 310% during this period, including dividends. but, retail inventory This index has significantly improved performance.
what i’m talking about is o’reilly automotive (NASDAQ:Orly). The aftermarket auto parts retailer’s stock has soared 619% since February 27, 2014, and his initial cash outlay of $10,000 has now turned into a whopping $71,880. Ta. Is now the time to buy this amazing stock?
boredom is the best
Fast-growing high-tech companies exposed to artificial intelligence The trend has recently caught the attention of investors. But don’t let that excitement distract you from O’Reilly and his boring business model.
With 6,095 stores across the United States, the company sells brakes, motor oil, wiper blades and more to DIY and professional auto mechanics. While he may be under the radar, O’Reilly has a history of success with strong fundamental performances.
From 2018 to 2023, the company’s revenue and diluted earnings per share grew at a compound annual rate of 10.6% and 19%, respectively. Even more impressive than these headline numbers is that O’Reilly has remained largely unaffected by the coronavirus pandemic, increasing sales by 14% and net income by 26% in 2020.
This business generated a large amount of profit free cash flow Last year it reached $2 billion. After reinvesting in growth strategies such as opening new stores and expanding distribution capacity, management is focused on buying back significant inventory. Over the past 10 years, the number of shares outstanding has decreased by 46%.
protect the negative side
The industry in which O’Reilly operates is highly fragmented, meaning there are many small independent shops competing. Customers have a sense of urgency in finding the right parts to make sure their cars work properly, so having sufficient inventory is essential. This is where O’Reilly’s scale can help it acquire other new customers and gain market share over time.
In addition to strong competitiveness and a runway for growth, O’Reilly is a recession-proof company. For the 12 months ended Dec. 31, the company reported same-store sales growth for the 31st consecutive year. This consistency speaks volumes about how durable the company is.
When the economy is strong, consumer spending is strong, and interest rates are low, people tend to drive more. This increases vehicle wear and tear, supporting the growing demand for O’Reilly products.
On the other hand, during times of uncertainty or recession, which many would consider an apt description of the current economic climate, consumers will refrain from purchasing new cars. At current interest rates, that certainly could be the case. In this scenario, people would invest in extending the useful life of their existing cars, again supporting demand for O’Reilly.
Investors who include this business in their portfolios don’t have to think for a second about what direction the economy is headed. Instead, you can sleep better at night knowing that the company is doing well, no matter what the macro backdrop is.
pay insurance premium
Thanks to the stock’s impressive performance, investors are currently being asked to pay a price-to-earnings ratio (P/E) of 28.4.This is a significant premium compared to the stock price’s average of 22.9 times over the past 10 years, and the stock price is S&P500The P/E ratio is 23x.
Paying this price for clearly superior business is easily justified. However, there is also a strong opinion that the valuation may be a little excessive at this point. Probably the best course of action is dollar cost average For several months.
Should you invest $1,000 in O’Reilly Automotive right now?
Before buying O’Reilly Automotive stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Things investors can buy right now…and O’Reilly Automotive wasn’t among them. These 10 stocks have the potential to generate impressive returns over the next few years.
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Neil Patel and his clients have no positions in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
This incredible stock has soared more than 600% in the past 10 years: Is it time to buy? Originally published by The Motley Fool
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